The classical economist Adam Smith is responsible for at least one of two important historical events in 1776. I'll give you a hint, it wasn't the American revolution or Declaration of Independence! No, Smith's contribution to the history of that year was the publication of The Wealth of Nations. You may be tempted to think that this event was insignificant in comparison to the other but don't be so quick. Smith revolutionized economics and, in essence, wrote the first "how to become rich" book. In a sense America is founded as much on Smith's economics as on Jefferson's Declaration.

The historical context of Smith's work was a world where mercantilism was the norm. This was the view that nations became wealthy by amassing gold and taxing imports (thus limiting free trade). Smith stands against these ideas by advocating free trade and the value of the division of labor as a means of increasing not only national wealth but also individual wealth. Indeed, the opening sentence of the book alludes to the importance of labor: "THE greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labor."

What's so great about division of labor? Well, first it allows for greater productivity. If you take a task (like making pins which is the example Smith uses) and divide it into many little tasks each given to one person the amount of pins you can make in a day is greatly multiplied. We can see this on a daily basis in any automobile factory. Think about how many cars you could make in a day if you had to do everything yourself. Perhaps not even one. But how many cars get produced each day by just one car plant. Hundreds? Thousands? Certainly whatever the number is, it is more than you could make on your own.

Now, who does this increased productivity benefit? Your first answer might be the owner of the factory (this will be Marx's answer) but Smith points out that this productivity also benefits the worker. The more productive a worker is, the more he can earn. Additionally, the more a worker can specialize the more that worker can improve his skill (thus increasing his productivity and marketability). Finally, Smith points out that the more a worker can specialize, the more incentive they will have to improve their methods of production and make them more efficient by introducing labour

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